Liquidmetal Technologies announced revenues for the fourth quarter ended December 31, 2002 achieved a nearly seven-fold increase to $5.9 million from revenues of $874,000 in the fourth quarter of 2001. On a sequential basis, fourth-quarter revenues were 61% higher than the $3.7 million in revenues reported for the 2002 third quarter ended September 30. Revenues for the year grew to $13.1 million compared to $3.9 million in 2001, a 238% increase.
“These results mark an exciting milestone for the company: the start of full production at our new state-of-the-art manufacturing facility,” said John Kang, Liquidmetal Technologies President and Chief Executive Officer. “Perhaps more important, they signal our trajectory of growth as we enter 2003. With each passing week and month, we are gaining momentum and demonstrating the viability of our revolutionary material technology in a high-volume manufacturing environment.”
The revenue gains largely resulted from a sharp rise in volume of products manufactured from the company’s proprietary bulk Liquidmetal(R) alloys. Construction of the company’s first full manufacturing plant was completed in September, accelerating the ramp-up of manufacturing capacity and providing a platform for the growth in sales of bulk alloy products and related revenues achieved in the fourth quarter.
The company’s bulk alloy segment accounted for 88% of 2002 fourth quarter revenues, while sales of Liquidmetal coatings contributed 12%. This compared to 19% and 81%, respectively, in the prior year fourth quarter, reflecting the company’s strategic shift in product mix. Although led by production of parts made from Liquidmetal alloys, bulk alloy segment results also include research and development revenues and furnace equipment sales. Liquidmetal(R) coatings are sold mainly to the oil drilling and power generation industries as a protective application in extreme-wear conditions.
As expected, higher expenses stemming from the company’s rapid scale-up resulted in losses for the fourth quarter and full year. For the quarter, the company reported a loss from continuing operations of $5.9 million, or $0.14 per share, compared with a loss of $2.9 million, or $0.08 per share, in the fourth quarter of 2001. For the year, the loss from continuing operations was $19.9 million, or $0.51 per share, compared with a loss of $5.2 million, or $.15 per share, from continuing operations in 2001. Including the effect of discontinued operations, the net loss for the quarter totaled $6.3 million, or $0.15 per share. This compared with net income of $3.0 million, or $0.09 per share, in the prior-year fourth quarter, which included a non-recurring gain of $5.8 million, or $0.17 per share, from a change in management’s estimate of the loss on disposal of a discontinued, pre-IPO business. For the full year, the net loss including discontinued operations amounted to $18.4 million, or $0.47 per share, compared with a net loss of $23.1 million, or $0.69 per share, in 2001.
Earnings per share calculations were based on 40,995,375 weighted average shares outstanding for the 2002 fourth quarter and 38,713,878 shares for the full year, compared with 34,993,723 and 33,323,217 shares in the respective prior year periods.
Fourth quarter and full year gross profits were sharply higher on the strength of the company’s revenue growth; however, gross margins were lower than in the prior year as an anticipated outgrowth of the accelerated shift in product mix toward a greater percentage of bulk alloy sales. Bulk alloy revenues currently carry a lower margin than the substantially higher-margin coatings sales that dominated the company’s smaller base of revenues in preceding quarters and the prior year. As a result, the gross margin was 27.1% in the current fourth quarter versus 54.0% in the fourth quarter of 2001. For the year, the gross margin was 33.9% versus 50.4% in 2001.
Manufacturing during the fourth quarter centered on production of cell phone casing components for Samsung Electronics, as well as prototyping of various products in development with other customers representing the company’s four main target markets for its bulk alloy products — electronic casings, medical devices, sports and leisure products, and defense products.
Capital expenditures totaled $11.2 million for the fourth quarter and $23.8 for the year, principally reflecting the costs of construction and equipment for build-out of the company’s manufacturing operations. Cash and marketable securities totaled $29.1 million at December 31.
“In virtually all respects, 2002 was a year of tremendous progress completed in an extraordinary timeframe and against the inevitable challenges of building a new manufacturing company literally from the ground up,” Kang said.
LIQUIDMETAL TECHNOLOGIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share data) (unaudited) For the Three Months For the Twelve Months Ended December 31, Ended December 31, -------------------- --------------------- 2002 2001 2002 2001 ---- ---- ---- ---- REVENUE $ 5,877 $ 874 $ 13,139 $ 3,882 COST OF SALES 4,286 402 8,679 1,924 -------- -------- -------- -------- Gross Profit 1,591 472 4,460 1,958 -------- -------- -------- -------- OPERATING EXPENSES: Selling, general and administrative 3,726 1,837 12,767 3,970 Research and development 4,817 1,171 11,825 2,057 -------- -------- -------- -------- Total expenses 8,543 3,008 24,592 6,027 -------- -------- -------- -------- LOSS BEFORE INTEREST AND OTHER INCOME, INCOME TAXES, MINORITY INTEREST AND DISCONTINUED OPERATIONS (6,952) (2,536) (20,132) (4,069) Interest expense (4) (319) (1,113) (1,103) Interest income 117 5 510 8 Gain on sale of marketable securities 832 -- 832 -- -------- -------- -------- -------- LOSS BEFORE INCOME TAXES, MINORITY INTEREST AND DISCONTINUED OPERATIONS (6,007) (2,850) (19,903) (5,164) Income taxes (123) -- (123) -- -------- -------- -------- -------- LOSS BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS (6,130) (2,850) (20,026) (5,164) Minority interest in income of consolidated subsidiary 204 -- 118 -- -------- -------- -------- -------- LOSS FROM CONTINUING OPERATIONS (5,926) (2,850) (19,908) (5,164) Loss from operations of discontinued retail golf segment, net -- -- -- (5,973) Gain (loss) from disposal of discontinued retail golf segment, net (418) 5,837 1,556 (11,949) -------- -------- -------- -------- NET (LOSS) INCOME (6,344) 2,987 (18,352) (23,086)